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tv   Nightly Business Report  PBS  November 29, 2012 7:00pm-7:30pm PST

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up over 20% this year. we go digging for the outlook on precious metals for the year ahead. that and more tonight on nbr! the path away from the fiscal cliff is neither straight nor smooth. talks hit a snag today as both republicans and democrats traded verbal fire over who goes first. republicans said they'd offered up new tax revenues, but have heard nothing from democrats about spending cuts. democrats said republicans were dragging their feet. we begin with darren gersh reporting even a visit by treasury secretary timothy geithner did little to change the mood on capitol hill. >> reporter: house speaker john boehner emerged from his sit- down with the president's negotiating team to declare he was disappointed. two weeks after the election, the speaker said democrats have yet to show what he called "adult leadership." >> right now, all eyes are on the white house. the country doesn't need a victory lap, it needs leadership. it's time for the president and congressional democrats to tell
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the american people what spending cuts they are really willing to make. >> reporter: that's not how the white house sees it. the administration called the republican position that tax rates should not change implausible after the election. and the white house warned republicans against using the debt limit as leverage to force agreement. >> asking for... that a political price be paid in order for congress to do its job, to ensure that the united states of america pays its bills and does not default for the first time in its history, is deeply irresponsible. >> reporter: at least talks are going on. the speaker and the president spoke by phone for almost half an hour last night. but a first negotiating round between treasury secretary timothy geithner and congressional leaders did nothing to improve the tone on capitol hill. democrats said the ball was in the speaker's court. >> we're saying, extend the tax cuts for the middle class as part of that. we know if we do nothing, the top rates go up. we're waiting for the republicans to come forward with something.
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that's our proposal, period. >> reporter: no one in washington ever thought negotiations to get past the fiscal cliff would be easy. now, more and more are talking about a rerun of what happened with the tarp bailout bill. first, congress may have to deadlock and go over the cliff, and then count on a falling market and an angry public to force action. >> it's what's euphemistically being called "let's let the peasants storm the castle with pitchforks" strategy. that is, get the average voter so upset that they pound on the... do the equivalent of pound on the door of their member of congress or the member of the senate, call their office and say, "look, i know i told you not to vote to raise taxes or not to vote to cut medicare, but you got to stop the pain." >> reporter: how bad could the pain get? after the house voted down the tarp bailout, the s&p 500 fell more than 8%. darren gersh, nbr, washington. >> tom: for more on the fiscal cliff negotiations, susie spoke with a leading democrat a short while ago, senator kent conrad of north dakota.
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>> susie: senator can rad thank you for joining us. let me begin our conversation by asking you, what are the chances that we will get a fiscal cliff deal by the end of this year? wince think they're reasonably good. all the building blocks are in place. at this point really people just have to choose from the options that are available. and it's hugely consequence for the country if we fail. so i remain opposite sdns-- optimistic. >> we heard dramatic sound bites when do we start rung out of time and risk going over the cliff? how much time dow need to get an agreement? >> well, realistically, if an agreement were reached in the next several weeks there would be time to get all of the language put together to have it implemented. so there is still significant time to get this agreement reached. >> as you know house speaker boehner was calling on democrats today to propose specific spending cuts to entitlement programs.
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we foe that the white house is proposing around $300 billion in cuts to medicare is that all the program can take or are republicans right in saying there is more room to cut entitlement spending? >> well, look financial they think it should be more than $340 billion or $350 billion, they should propose it. i don't know, you know this is not a one-way street. this isn't a circumstance in which it's just democrats that have a responsibility to propose things. democrats have proposed extending the middle class tax cuts and that bill is waiting for house action right now. that passed the senate on a bipartisan vote. republicans in the house could take that up and pass it in the next 24 hours. >> susie: on the revenue side we're seeing many companies that are rushing to pay special dividends to get ahead of higher tax rates next year. is it a foregone conclusion that the tax rates on things like capital gains and dividends that are now 15% are going go up in 2013?
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>> i think in any final agreement cap gains and dividend rates are going have to go up and go up substantially in order to get an agreement. >> you know, we have been talking now about the cliff, going over the cliff, avoiding the cliff. but at the end of the day do you think the american public is really prepared for these deep spending cuts and the magnitude of changes that are going to be coming over the next decade? >> well, frankly, i don't think the spending cuts need to be all that deep. i have tolted my colleagues on many occasion if we had 6% more revenue than we currently are forecasting, 6% less spending than we're currently forecast that would save $6 trillion and billion the budget over the next ten years. so there do need to be spending cuts but they don't need to be all that draconian, truth be told, remember, you're talking about $340 billion out of medicare and medicaid over the next ten years. we're going to spend 11
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trillion dollars over that period. so 340 billion is 3%. you know, we got to put this in perspective. >> well, a lot of economists who put it in perspective say it going to be a tough economy for the next decade is there anything this there fiscal cliff negotiations that there would be a package for jobs or helping the economy over the next couple of years in the near term? >> well, one would hope so my own belief is there should be significant investment in roads, bridges, airports, schools, other infrastructure for this country because we not only have a fiscal deficit we also have an infrastructure deficit. that would give two advantages. one, it would employ people in this country at a time when unemployment is too high. and number two it would improve the competive position of the country so, that's a to-for. >> susie: senator conrad, thank you for coming to the program. we appreciate it. >> thank you, always good to be with you.
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>> reporter: i'm erika miller in new york. still ahead, we'll look at why silver has been one of the best performing asset classes this year. >> tom: the u.s. economy was hotter than first thought this summer. in the newest data on the gross domestic product, the economy grew in the third quarter at its fastest pace of the year. the revised report said the economy grew at a 2.7% clip. that's well above the previously reported 2% growth. adding fuel was restocking inventories, which is not expected to continue. higher federal government spending and stronger u.s. exports also helped. the impact super-storm sandy has had on the job market seems to be dissipating. 23,000 fewer americans filed for first-time unemployment benefits during thanksgiving week compared to a week earlier. the total was 393,000. it had jumped to over 400,000 in the weeks following the storm. still, we saw just modest gains on wall street today-- the dow rose 36 points, the nasdaq was
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up 20, and the s&p 500 added six. >> tom: the roster of companies announcing special one-time paydays for their shareholders continued growing today. taxes on stock dividends are currently set at 15%. but with no deal on the fiscal cliff, dividends will be taxed like regular income, meaning they could go up to over 40% for some high-income households. we spoke with larry mendelson, the chairman and c.e.o. at avionics gear maker heico, which announced its own special dividend this week. larry, thank you for joining us, we appreciate it. what role did the fiscal cliff play in heico decision to paid fiscal dividend. >> i think the fiscal cliff was very important. and moreover the threat to increase taxes in 2013, taxes on difficult dengeds would be about give or take 44%. and this year dividend would be taxed at 15. so that's a big incentive to pay difficult dejds early.
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and that's what we did. we paid them in 2012. >> yeah, you moved up a dividend. you would have paid in january for december. but you also added 1.14 a share in a special dividend in which will borrow money to pay. why do a special dividend on top of your regular accelerated dividend? >> we did it one, to share with our shareholders. some of the good fortune and profits that we have had over the years. we've been extremely profitable company. normally we keep money back to make acquisitions. but we thought that we could afford to pay $1.14 dividend. and it wouldn't impinge upon our ability to grow, to make acquisitions or to constrain the company in any way. heico is not a capital constrained company. some people suggested we pay more than $1.14, maybe 2 boy 50. >> was that unconsideration. >> it was under consideration because in our dividend policy we consider many different scenarios. >> yeah. >> but we felt that the most,
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the optimum number for us, management and the board agreed, would be about $1.14 or total 1.20 dividend. >> the special dividend, the fiscal cliff didn't come into consideration to pay the special dividend, or did it? >> well, when you say the fiscal cliff-- it was really the fact that taxes, we are virtually certain that taxes on dividends will be raised and raised significantly. and it was the tax on dividend as opposed to specificly the fiscal cliff, if you will. but it's the fact that dividends will be taxed at higher rates. >> you will be paying out about $60 million in dividends. >> we will. >> you will be borrowing that money. why is that a good use of your borrowing capacity? >> well, number one, we generate cash very, very quickly. we generate about 120 or 1-- 150 million dollars a year in free cash flow, so we're talking about a year, maybe less than six months of cash flow.
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number two as i tould we are not capital constrained. >> right. >> so this is not a burden on our credit facility. >> so why use the credit facility to pay your shareholders versus use it to look for new acquisitions that could accelerate your rate of growth? >> because we, number one, we-- basically heico runs without cash. we look to-- we look to our credit facility. heico is a very excellent rated credit. we're very high quality credit, very strong balance sheet. we have very little debt. we are now paying less than 1 1/4 percent for money. so it's really very inexpensive so the tax so, to speak s on the earnings is very, very little. >> real quick, the stock has a nice rally. why wouldn't you want to buyback shares as opposed to dot special dividend. >> we feel that buying back shares is really not as
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efficient for us, as paying the dividend. we wanted to recognize. number two, we don't like to push the stock price up and interfere if we don't have to. the only time we step in the market is if the market really gets weak and it drops. but heico is not a very liquid stock that people dump it even when it goes down. so it's hard to buy when shares go down. so we let the market decide what the price should be. >> shareholders certainly have been approving lately. larry men dollson chairman & ceo of heico, thank you. >> thank you, very much tom. >> tom: this isn't the first time a wave of companies have issued special dividends in the face of a tax scare. we'll have more on that tomorrow.
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it has paid to go mining for investment profits this year. silver and platinum have rallied more than the s&p 500 so far, while gold is up double digits, too. erika miller went digging for the investment outlook for precious metals at an industry conference in new york today. >> reporter: here's a question-- what looks good on your finger and also in your portfolio? if you answered gold, or even platinum, you're right. but silver is actually the best answer. it is up a sparkling 23% this year, more than double the gain in gold. platinum is in the middle, surging 16%. part of the reason silver is leading the pack is strong industrial demand. yes, silver is used jewelry and silverware, but that's only 21% of demand. nearly half of the silver that
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is mined globally is used by industries. >> it's being used increasingly in biomedical, in high tech, environmental for water purification, in hospitals as an antiseptic. so it's not just the old traditional smokestack industries and electronics that are using silver. it does really have very, very wide versatility. >> reporter: but what about the outlook for precious metals next year? a lot depends on what happens to the global economy and whether the u.s. falls off the fiscal cliff. if the cliff is averted... >> then i think you will see silver, platinum, palladium-- the so-called white metals-- outperform gold, because they will tend to outperform in a risk-on environment in a cyclical upturn. >> reporter: now, the other scenario: >> in an environment where we go off the fiscal cliff and we see continued problems on the debt side for the u.s., i think the gold price outperforms the white metals. >> reporter: gold's price will also depend on whether central banks continue to diversify their holdings into gold, and whether they implement more
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quantitative easing to boost growth. the outlook for platinum is a little more complicated. there have been major supply disruptions due to labor unrest in south africa, which produces nearly all of the world's platinum. it also depends on demand. >> europe is a key part of the platinum demand picture. if europe can recover, certainly that's going to bode well for platinum demand. if the price trades higher, it may affect some of the price- sensitive sectors like jewelry, like chinese jewelry demand. >> reporter: of course, many investors only buy metals for investment reasons. currently, there's over $150 billion invested in gold exchange-traded funds, an all- time high. erika miller, nbr, new york.
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>> tom: the broad market drifted higher with one eye on economic data and the other on washington. the s&p 500 fell to its low of the session when house speaker john boehner expressed disappointment over the pace of fiscal cliff negotiations. the index shrugged it off, ending higher by four tenths of a percent. volume was 677 million shares on the big board; under 1.8 billion moved on the nasdaq. all ten of the major stock sectors rose. the telecommunications sector had the strongest gain, up nine tenths of a percent. the health care, materials and utilities sectors were each higher by six tenths of a percent. health insurance giant united healthcare led its sector and the dow industrial stock average. trading volume almost doubled with the stock up 3%. on monday, the company's profit
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prediction for next year was less than anticipated. but with today's rally, shares have recovered from that sell- off and then some. retail continues to be in focus. the calendar month may not be over, but for several stores, the sales month for november is in the books. 17 chains reported sales at stores open for at least year. overall, sales were up 1.6%, according to thomson-reuters. that's only half the growth expected. the impact of hurricane sandy on the east coast earlier in the month gets the blame for the disappointment. among those with worse than expected results, kohl's shares plunged 12% as volume jumped ten times normal. kohl's in all regions of the u.s. reported a drop in november sales. macy's stock fell 4.3% to its lowest price since halloween. its same-store sales were down for the first time in three years. jewelry store tiffany cut its outlook after a weak third quarter.
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profits were held down by weaker consumer demand, as well as higher costs for precious metals and diamonds. that pinched its profit margins. the stock saw heavy volume, sliding 6.2%. in focus after the closing bell was yum brands, the parent company of kfc, taco bell and pizza hut. after hitting an all-time high during the trading session, the stock was down almost 7% in extended hours trading. yum warned china sales have softened, leading to an earnings outlook for next year that is short of expectations. research in motion has a lot riding on its newest blackberry device when it's released in late january. investment bank goldman sachs is the latest to expect good things. it upgraded its view of the stock from "neutral" to "buy". shares of rimm have been rallying since late september, when they traded at an eight- year low. the stock moved up 4% today on heavy volume. goldman sachs thinks wall street is underestimating the business
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research in motion will see thanks to its new blackberry next year. all five of the most actively traded exchange traded products were up. the i-shares japan fund led the gains, up 1.2%. and that's tonight's "market focus". next week, we will see how november treated auto makers. the head of volkswagen north america thinks superstorm sandy may cut into industry-wide sales by as much as 50,000 vehicles. v.w. and its competitors from around the globe are rolling out some of their newest products this week at the los angeles auto show. and for v.w., what's old is new. diane eastabrook has details.
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>> introducing the beetle convertible special edition. >> reporter: for baby boomers, the iconic beetle is a blast from the past. for volkswagen, it's a crucial connection to the competitive u.s. market place. >> really, the beetle represents the heart and soul of the volkswagen brand, especially in the u.s. everybody's got a story about the beetle somewhere in their family. >> reporter: the introduction of the new beetle convertible comes a year after v.w. redesigned the bug. the german company made the car more masculine, hoping it would appeal to both men and women. and it seems to be working. selling more products in the u.s. is key if volkswagen hopes to reach its goal of becoming the world's largest auto maker. it's currently third, behind toyota and g.m. it's making inroads here, but still has a way to go. volkswagen reported its best october in america in 30 years, selling a little more than 34,000 vehicles. that was a 22% increase over the same month a year ago.
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still, those figures paled in comparison to what the big three domestics sold. and while v.w.'s u.s. market share has doubled in the past five years, it's yet a fraction of the overall market. still, analysts are impressed with the job v.w. is doing in the u.s. and think the company can build on its success. >> it's just the basics of good marketing, good product so that the customers have the perception of a good package, a good vehicle, at a reasonable price. >> reporter: recently, volkswagen announced plans to invest $65 billion in its nearly 100 plants worldwide, including its chattanooga, tennessee, plant, where it plans to increase production of the passat. v.w.'s browning thinks industry- wide sales could hit 15 million units here next year, if the u.s. quickly solves its budget problems. >> clearly, there's a lot of issues in terms of the fiscal cliff to be addressed, and we don't expect them to be impacting consumer confidence too heavily. but the longer those debates go
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on, the more uncertainty there is in the market. >> reporter: browning thinks with products like the beetle convertible, volkswagen can continue to gain traction with u.s. consumers. diane eastabrook, nbr, chicago. >> tom: tomorrow on nbr, our friday "market monitor" guest says, cliff or no cliff, next year will be bullish for stocks and the economy. haverford investments' hank smith will join us. finally, kfc at 35,000 feet. starting saturday, kfc meals will be available on some japan airlines flights. it's being billed as "air kentucky fried chicken." travelers will get a two-piece chicken meal with flatbread and coleslaw. why kfc and not sushi? the fast food chain is very popular in japan, especially during the holiday season. that's "nightly business report" for thursday, november 29. we want to remind you this is
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the time of year your public television station seeks your support. on behalf of your local station, thank you for your support. good night, everyone. we'll see you online at, and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh
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♪ and their buns are something i have yet to find anywhere else. >> i'm not inviting you to my house for dinner. >> breaded and fried and gooey and lovely. >> in the words of arnold schwarzenegger, i'll be back!


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